Entrepreneural Strategy, generating and exploiting new

Entrants

To understand that the essential act of entrepreneurship involves new entry

To be able to think about how an Entrepreneural strategy can first generate, and then exploit our time, a new entry

To understand how resources are involves in the generation of opportunities

To be ale to access the attractiveness of a new entry opportunity

To acknowledge that entrepreneurship involves making decisions under conditions of uncertainty

To be able to assess the extent of first movers advantage and weigh them against first moves disadvantage

To understand that risk associated with newness, but there are strategies that the entrepreneur can use to reduce risk.

New product : Established / new market Established Product : New Market Creating a new organization

Set of Decisions, actions, and reactions that first generate and then exploit over a time new entry

Three Stages Generation of a new entry opportunity Exploitation of a new entry opportunity Feedback

Resources a source of competitive advantage

A bundle of resources includes Valuable ( It enables the firm to pursue

opportunities neutralize threats and offer products and services that are valued by customers)

Rare ( it should be possessed by few/potential competitors)

Inimitable ( it would be difficult or costly for potential competitors)

Entrepreneural resource its liability to obtain then combine the resources into a bundle that is variable, rare and inimitable,

It can be possible through following steps Experience of entrepreneur or manager Collective mind of management and

employees Knowledge of the market Knowledge of the technology Innovative

Its about the entrepreneurs information about market and its skills.

Problems of customers Customers attitudes and behaviors

Possession of information, technology, know-how and skills

If the market is limited then entrepreneur must know how to create new markets.

He must know how to exploit the technological advantage over its competitors.

Information on a new entry Prior knowledge and information search Windows of opportunity Error of omissionOccurs from the decision not to act on the new

entry opportunity. Error of commissionOccurs from the decision to pursue this new

entry opportunity only to find out later that the entrepreneur had over-estimated his ability to create customer demand from imitation by competitors.

First mover develop a cost advantage First mover face less completive

challenge First mover can secure important

challenge First mover are better position to satisfy

customers First mover gain expertise through

participation

External Environment

InternalEnvironment

Company

An entrepreneur should always strive to create the best possible match between the companies resources with the external environment

Key success factors of an industry help in determining that best fit

First movers have a disadvantage that the key success factors are not known. He has to really on his guess.

Emerging industries give the first movers the advantage of choosing the way to success including establishing the rules of the industry.

FIRST MOVER DELAYED ENTRY

Little information potential size of market,

expected growth pattern.

Difficult to measure future demand.

Over-estimating demands leads to additional cost

Under-estimating demands lead to under capacity and shortage of supply

Information is available

Future demand is easy to predict

They can avoid additional costs by correctlty estimating demand.

FIRST MOVER DELAYED ENTRY

Growth pattern and change in customer preferences is difficult to predict.

Customers preferences are immature and bound to change

Growth pattern and change in customer preferences is predictable

Customer preferences are matured with time.

FIRST MOVER DELAYED ENTRY

Uncertainty is more Its not known whether

technology will produce the desire result or not

Risk exists in emergence of substitute technology.

Incase of failure ,losses are incurred

Uncertainty is minimal

Results are known Risks are minimized

by using the most optimal technology which is known to work

Additional losses are not incurred

FIRST MOVER DELAYED ENTRY

Difficult to adapt to new changes

Entrepreneurs attributes of persistence and determination stops him from detecting and implementing the change

Easy to adapt to changes.

New products-new markets, customers are uncertain

Uncertain about use of product that whether it will satisfy or not

Customers are uncertainty averse Customers are uncertain about whether it

will perform better than the existing one Entrepreneur should reduce customer

uncertainty

Offer informational advertising Comparison marketing Tough to offer informational advertising

for complex product Customers are aware of product usage

but still reluctant to buy e.g. software package

Entrepreneur should give demos and presentations

Lead time-the time during which the entrepreneurs prepares for increase competition

Entrepreneur can use marketing efforts to position image

Building customer loyalties Building switch costs Protecting product uniqueness Securing access to important source of

supply and distribution

Involves considerable risks. May be due to competitors technology or

market demand Strategies can be used to reduce risk. Two strategies are used

Market scope imitation

Market scope strategy Scope- is a choice about which consumers

group to serve and how to serve them It ranges from narrow to broadNarrow scope Strategy Offers a small product ranged to a small

number of customer groups in order satisfy a particular need

Reduces the risks for failing Focuses for customized products Reduces competition

By focusing on specific groups of customers the entrepreneur can build up specialized expertise that provide competitive edge

The high end of market typically represent a highly profitable niche.

Broad Scope Strategy Portfolio approach Gain understanding about market and

products Unsuccessful products can be dropped It creates competition Reduces risks.

Copying the practice of other firms Benefits

To minimize the risks To improve performance at the first appearance in

consistent with argument It is necessary to be successful in an industry It quickly acquires skills rather than start from scratch Imitation also provides organizational legitimacy If the entrepreneurs acts like a well established firm

its is likely to be perceived by customers as well established.

Imitation is a means of gaining status and prestige e.g. consultation firm( location , leather chairs, suits)

Franchising Franchisee acquires the use of a proven

formula for new entry for the franchiser. E.g. McDonalds. ( intellectual property)

Me to strategy Copying products that already exists and

attempting to build an advantage through minor variation. For example Ice cream

Negative impact Faces cost time training employees and to

enhance the skills Overlaping and gaps in responsibilty often

cause conflicts Communication gap-Formal and Informal

(new ventures there will be formal communication due to newness)

Positive Impact Pay special attention on employees training and

social needs. Manage good systems and routines, and the

new employee are determined.